Takata Picks Key Safety Systems as Favored Bidder

Airbag supplier Takata Corp. has selected Sterling Heights, Mich.-based Key Safety Systems Inc. as the preferred bidder to buy the company, according to media reports.

Key and Swedish airbag maker Autoliv Inc. had been considered the two frontrunners. But reports last month indicated that Takata was concerned about regulatory hurdles with Autoliv, which already controls about 40% of the global airbag market.

It isn’t yet clear how Takata would be restructured under new ownership. Bidders have indicated a preference for a court-led process, which would define and limit their exposure to Takata’s potential liability. Some analysts estimate the company could face fines, repair costs and legal settlements totaling as much as $10 billion.

The news about Key triggered a heavy surge in sell orders for Takata shares by stockholders who are convinced the supplier is headed for some form of bankruptcy.

To date some 19 carmakers are recalling about 100 million Takata airbag inflators that could explode when triggered by a crash. The flaw has been blamed for at least 16 deaths and 100 injuries worldwide.

Takata agreed in January to pay $1 billion in penalties in the U.S. to settle federal criminal charges that it hid flaws from customers and regulators. But state and individual lawsuits remain, and Takata’s carmaker customers have not yet indicated how much they may demand in payment from the company to offset the cost of the recalls.

Key, which makes seatbelts and airbag systems, was acquired last summer by China’s Ningbo Joyson Electronic Corp. for $920 million. The company generates about $1.4 billion in annual sales.